Is Your Nonprofit Prepared for the New FASB Requirements?
Has your nonprofit organization prepared for new FASB reporting requirements? These changes will impact all nonprofits and are intended to improve nonprofit financial statements with the goal of providing more useful information to stakeholders. FASB ASU 2018-14 is the first of a two-phase project, intended to strengthen clarity, transparency, and consistency in nonprofit financial reporting.
For those of you who haven’t yet transitioned to the new guidelines, the upcoming Sage Intacct release is going to make your life much easier! In response to the new FASB 958 reporting guidelines, which are set to take effect as early as the end of 2018, we've added new prebuilt compliance reports and dashboards to support your NFP organization during this transition.
When you need to comply with the new report format depends on what year your organization follows. The changes in this update are effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018.
What are these changes though?
Highlights of Changes to Net Assets
Nonprofit organizations currently utilize three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. These will now become two classes:
- Net assets with donor restrictions
- Net assets without donor restrictions
Footnote disclosures will be required to include the timing and nature of the restrictions, as well as the composition of net assets with donor restrictions at the end of the period.
Part of the associated changes to net asset classifications will include a change to how underwater endowments are handled. Under the new guidelines, these assets (that have a current value that is less than the original gift or required to be retained amount) will now be classified as ‘net assets with donor restrictions’. Board-designated net assets will now require disclosure of amounts and purposes. Additional disclosures related to these assets will also be required.
Nonprofits currently can recognize the expiration of a donor restriction over time, but under new guidelines, they will need to reclassify net assets with donor restrictions that are used to acquire or construct long-lived assets as “net assets without donor restrictions” when the asset is placed in service.
Highlights of Statement of Cash Flows Changes
Currently nonprofit organizations are required to provide an indirect reconciliation when using the direct method of presenting operating cash flows. With the new guidelines, nonprofit organizations will be able to select the presentation method that best serves the entity, and no reconciliation will be required.
Highlights of Changes to Statement of Activities
With the new FASB guidelines, nonprofits will need to present the amount of change in each of the two new classes of net assets and the total net assets. They will need to present two subtotals of operating activities that each correspond with changes in net assets without donor restrictions. All nonprofit orgs will now have to provide information about their operating expenses by both nature and function and include enhanced disclosures about their methods of allocating costs among the different functions. A ‘net presentation’ of investment expenses against investment return will be required on the face of the statement of activities.
Highlights of Changes to Transparency/Liquidity
Additional/enhanced qualitative and quantitative information will be required, on the face of the balance sheet or in the notes, to report on spendable financial resources.
Simplify compliance with Sage Intacct’s Prebuilt Compliance Reports and Dashboards
Our goal is to not only make your reporting transition quick and easy, but to provide you with tools that make communication and documentation a breeze.
Sage Intacct provides prebuilt FASB 958 compliant reports to make the transition to the new standards easier, including:
- Statement of Financial Position
- Statement of Activities
- Statements of Cash Flow (both Direct and Indirect)
- Statement of Functional Expenses
- 990 Reporting Worksheets
Using prebuilt compliance reports and tailoring them as needed for your nonprofit, you’ll save time by not having to create reports from scratch.
“For many of our nonprofit clients, the impact of the financial reporting changes in ASU 2016-14 is substantial, and the deadline is upon us. Sage Intacct’s compliance dashboards will enable organizations to quickly and effectively apply the reporting needed not just for year-end audits and external reporting, but throughout the year.”—Allison C. Webb, Partner, CapinCrouse LLP
Streamline telling your financial story with centralized quantitative and qualitative information
Trying to balance your ongoing activities along with planning a reporting transition can be stressful. With the collaboration tools that you can use within the dashboards, your organization can stay connected and informed – without digging through email and documents.
Plus, new prebuilt Compliance and Disclosures Dashboards provide a centralized location for both your quantitative and qualitative information. You won’t need to track your disclosures in spreadsheets.
Drill-downs to your audit reports will simplify audits. Having all information in one place also streamlines telling your story to the board and other stakeholders.
With the collaboration tools and centralized information, you’re able to easily work with other contributors to:
- Document disclosures
- Create your qualitative story alongside your quantitative information
- Streamline reporting to the board
“I really like the footnote disclosures. I don’t need to maintain them outside the system in Excel spreadsheets. And, the ability to tie and drill-down to the audit report is incredibly helpful. It’s one more thing that I don’t need to think about when the auditors come in the door!”
-- Eric Jensen, CPA, Behavioral Health Resources
Leverage the latest Sage Intacct functionality to free up your team to focus on better telling your org’s story – supporting and ensuring sustainability for your mission.
To Learn More
The FASB Compliance Reports are available to existing customers now who are using the nonprofit Quickstart templates. Check out the Release 3 Release Notes or talk to your Customer Account Manager for more information.
Not yet using Sage Intacct? Attend a Coffee Break Demo or check out our Product Tour for Nonprofit Organizations to learn more about how Sage Intacct can help you maximize the impact of your organization.
A native Texan, Joan has over 25 years of experience in the accounting, technology, publishing, and nonprofit fields. Bringing her experience as a nonprofit financial leader to Sage Intacct, Joan has been instrumental in creating solutions, and providing support and best practices that help ensure nonprofits achieve their mission.